Student housing: Young Ones move into penthouse

GARETH MACKIE

A £67m residential project in Glasgow highlights how students are fuelling their own property boom, writes Gareth Mackie

STUDENT housing has come a long way in the three decades since The Young Ones hit our screens, with today’s undergraduates eschewing cold baked beans and annual trips to the laundrette in favour of satellite television and on-site gyms.

The new student apartments are a far cry from the squalid digs of TV's The Young Ones

A growing number of firms are moving into the market for purpose-built student accommodation, and last month Select Property Group made its first foray north of the Border with plans for a £67 million development in Glasgow.

“It’s an amazing city in terms of its size, the quality of universities and the fact it has 80,000 students,” says Trevor Moore, chief operating officer at Select Property Group.

“The lack of high-quality, purpose-built accommodation attracted us initially to look at the city in more detail, and the more we looked the more excited we became. If you consider the quality of accommodation that’s out there, a lot of it’s old and tired and would benefit from a refresh.”

Moore, a former chief executive of camera chain Jessops and music retailer HMV, admits that having a newly-built flat instead of a bedsit “comes at a price”, with the firm’s customers typically paying about £200 a week for their digs.

The interior of one of Select's student apartments

“That’s an all-inclusive rent and there aren’t any hidden extras – it covers all their utility bills, television licence, we insure their possessions and we clean their room for them weekly. We even fill their rooms with goodies like tea, coffee and sweets when they arrive and make sure they have all the utensils they need in their kitchens.”

To fuel the demand for student housing in Glasgow, Select is looking for investors willing to pay upwards of £118,000 for each unit at its Glasgow project, some 500 metres from the University of Glasgow’s new main entrance and 100 metres from Partick subway station.

Moore says there is no such thing as a “typical investor”, with backers ranging from retirees who have taken a lump sum and want a hands-off investment that guarantees a yield of 7 per cent for five years, to wealthy business people looking to buy an entire floor of a development.

Work on the West End site has just begun, with the first phase set for completion in August 2016 and the second due by the end of that year.

Once finished, the 441-unit complex will be managed under the group’s Vita Student brand – Moore is its chief executive – adding to existing sites in Bristol, Exeter, Liverpool, Manchester, Sheffield and Southampton. Facilities at those locations include gyms, film theatres and “bespoke study areas”.

“People have a choice with regards to their disposable income – some will want to economise on their accommodation and spend more on entertainment and activities, but for others it’s important to have a very safe, well-managed environment that’s well located for their studies,” says Moore.

“For us it’s all about the end-user experience. If they have a brilliant time and fall in love with where they live, they’ll choose to re-book and tell their friends and that makes our life so much easier.”

Select was founded in 2004, targeting Dubai’s residential property market, and eight years later launched its first Vita Student project in Liverpool. Glasgow marks its tenth development and its largest so far as it seeks to address a “massive” under-supply of purpose-built accommodation.

The company has also considered establishing a foothold in the Edinburgh market, submitting plans for a site at the Fountainbridge regeneration scheme, but has suspended its application while it awaits a new student housing policy from Edinburgh City Council.

Student housing in the capital has become something of a thorny issue, with the Scottish Government recently ruling in favour of a controversial development by Unite Students on the site of a Homebase store on St Leonard’s Street after it was initially rejected by the council. Planning bosses said the proposed 579-bed unit would push the Southside’s student population above 61 per cent – twice the level recommended in city guidelines.

Moore says: “We have a significant number of residents who are international students and they contribute actively to the economy. Our view is that they want to live close to the university, and if that’s taking out private housing stock, that’s preventing other people from renting property that they would normally have access to.

“If you’re creating a purpose-built environment that has security 24 hours a day, you’re a good neighbour and respect the community you’re part of, we hope that’s understood and operators get the opportunity to develop the sites where there is clearly a demand.”

Select is focusing on opportunities in Glasgow and Edinburgh, but Moore does not rule out expansion further north to the likes of Aberdeen and Dundee,

“There are a number of interesting markets in Scotland,” he says. “We have a team on the ground hunting down opportunities, but at the moment none of those are developed enough to be able to commit.”

Purpose-built market soars

Select Property Group chief executive Mark Stott (below) described the purchase of the 2.9-acre site on Glasgow’s Beith Street as a “major milestone” for the firm.

“Glasgow is Scotland’s largest city and houses six universities which attract an international market of more than 80,000 students as one of Europe’s most popular places to study, ” he said when plans for the £67 million project were unveiled last month.

A recent report from property consultant Savills said that investment into the purpose-built student accommodation market soared 23 per cent to £2.45 billion in 2014 – but that figure had already been surpassed in the first five months of this year, with £4.2bn of assets traded.

The firm’s latest spotlight on the UK student housing market shows that Aberdeen and Glasgow remain attractive as opportunities for investment, although conditions in both cities “have become more competitive”.

Edinburgh is ranked in the top tier of Savills’ league tables, which are designed to reflect the potential for future development of purpose-built accommodation, taking into account current and projected levels of supply and demand.

“With a proven track record of returns and strong demand from students, the first five months of 2015 have seen record investment into the sector from across the globe,” Savills said.